HOW TO HAVE A SUSTAINABLE INNOVATION?
THE CASE OF CORTICEIRA AMORIM
Duarte Pinto Pacheco Nobre
Dissertation submitted as partial requirement for the conferral of
MSc in Management
Supervisor:
Álvaro Rosa, Assistant Professor, ISCTE Business School, Department of Marketing, Operations and General Management
I ABSTRACT
Innovation plays an important role for companies achieve a good market position and face competition. With innovation is easier to deliver the right product at the right time and in the right place, which will retain customers and create value. Although, innovation cannot be used so easily without control, it is necessary to be aware of the innovation impact in the sustainability of the industries. Accordingly, the concept of sustainability is taking a place in company’s agenda.
The purpose of this thesis is to elaborate a dissertation to understand the relation between innovation and sustainability and to explain how companies can innovate and, at the same time, guarantee the sustainability of the industry. Corticeira Amorim is the company chosen for the development of this dissertation. By understanding how Corticeira Amorim works, it is possible to explain how innovation can be sustainable.
This dissertation follows a theory-testing research model, using a qualitative and quantitative analysis. Both primary and secondary data were used, being the interview the method chosen to collect primary data. Furthermore, it was used a conceptual framework to understand and analyze the relation between innovation and sustainability.
In terms of results, it was found that it is possible to have a sustainable innovation, being the CA a practical example of that. Additionally, it was found that CA adopts a strategy of innovation based on the circular economy concept, to guarantee a sustainable innovation.
II RESUMO
A inovação desempenha um importante papel para as empresas alcançarem uma posição líder no mercado e serem competitivas. Através da inovação é mais fácil ter o produto certo, no tempo e no lugar certo, o que irá permitir aumentar a retenção de clientes e a criação de valor. No entanto, a inovação não pode ser usada assim tão facilmente, é necessário ter atenção do seu impacto na sustentabilidade das industrias. Neste sentido, o conceito de sustentabilidade está cada vez mais presente nas empresas.
Esta tese tem como objetivo elaborar uma dissertação que permita compreender a relação entre inovação e sustentabilidade e explicar como é que as empresas inovam e, ao mesmo tempo, garantem a sustentabilidade da indústria. A Corticeira Amorim é a empresa escolhida para o desenvolvimento deste trabalho. Ao compreender como esta empresa funciona, é possível explicar de que forma a inovação pode ser sustentável.
Esta dissertação segue um modelo de pesquisa baseado em testar teoria, usando uma análise qualitativa e quantitativa. Foram usados dados primários e secundários, tendo sido a entrevista o método escolhido para a recolha dos dados primários. Adicionalmente, usou-se um quadro conceptual para compreender e analisar cientificamente a relação entre inovação e sustentabilidade.
Face aos resultados, verificou-se que é possível existir uma inovação sustentável, sendo a CA um exemplo prático. Verificou-se também que a estratégia de inovação da CA baseia-se no conceito de economia circular, de forma a garantir uma inovação sustentável.
Palavras Chave: Inovação sustentável, economia circular, Corticeira Amorim, sucesso a longo prazo.
III ACKNOWLEDGEMENTS
First of all, I would like to thank to Professor Álvaro Rosa for accepting to be my supervisor and for all the help he gave me throughout this work and this semester. His competence, knowledge, experience and feedback were very important to conduct this thesis. Additionally, I want to express my gratitude to all the encouragement and friendship of the Professor.
I would also like to acknowledge to Corticeira Amorim the contribution given to this thesis.
Finally, I would like to thank my family and friends for all the support and strength they gave me during the elaboration of this work.
IV INDEX ABSTRACT ... I RESUMO ... II ACKNOWLEDGEMENTS ... III INDEX ... IV INDEX OF TABLES ... VI INDEX OF FIGURES ... VI INDEX OF CHART ... VI ACRONYM ... VII 1. Executive Summary ... 1
2. The Problem Definition ... 3
3. Literature Review... 4
3.1. Innovation... 4
3.1.1. Concept and characteristics ... 4
3.1.2. Innovation and competitive advantage ... 8
3.2. Sustainability ... 10
3.2.1. Several points-of-view ... 10
3.2.2. Sustainability in today’s business ... 11
4. Conceptual Framework ... 14
5. Methodology ... 17
5.1. Research purpose... 17
5.2. Research strategy... 17
5.3. Case study research ... 18
5.4. Source of data in research ... 19
5.5. Data collection... 19
6. Data Analysis ... 21
6.1. The cork... 21
6.2. The cork industry ... 22
6.2.1. The cork industry ... 22
6.2.1.1. Analysis of the five forces affecting the cork industry ... 25
V
6.3. Corticeira Amorim ... 35
6.3.1. History ... 35
6.3.2. Company Performance ... 39
6.3.3. Product and Business Units ... 40
6.3.4. Main Competitors ... 41
6.3.5. A Successful Company ... 42
6.3.5.1. Leadership Position ... 42
6.3.5.2. Competitive Advantage Position ... 43
6.3.6. The necessity for innovative ... 44
6.3.7. The commitment to sustainability ... 46
6.4. APCOR... 47 7. Conclusions ... 51 7.1. Main conclusions... 51 7.2. Limitations ... 52 7.3. Future research ... 53 8. Bibliography ... 54 9. Appendixes ... 61 10. Annexes... 65
VI INDEX OF TABLES
Table 1 - Cork Forest Area ... 23
Table 2 - Global Cork Production ... 23
Table 3 - World Cork Exports ... 24
Table 4 - World Cork Imports ... 25
Table 5 - Portuguese Cork Industry Company's Activities ... 28
Table 6 - Trade balance of the cork industry (million €) ... 34
Table 7 - The top 4 of Portuguese cork companies ... 35
INDEX OF FIGURES Figure 1 - Robert Cooper's Stage- Gate Model: Innovation Process ... 6
Figure 2 - Conceptual framework for sustainable innovation ... 15
INDEX OF CHART Chart 1 - Area of Cork Oak Forest in Portugal by Region (%) ... 27
Chart 2 - Structure of Cork Sales (Exports) per Product Type ... 28
Chart 3 - Evolution of Portuguese Cork Exports 2001-2015 ... 29
Chart 4 - Portuguese Cork Exports by Country of Destination in 2014 ... 30
Chart 5 - Portuguese Cork Exports by Country of Destination in 2015 ... 31
Chart 6 - Portuguese Products Exported (Million €) ... 32
Chart 7 - Portuguese Products Exported (Thousand Tonnes) ... 32
Chart 8 - Evolution of Portuguese Cork Imports Between 2001 and 2015 ... 33
VII ACRONYM
APCOR – Associação Portuguesa de Cortiça
BU – Business units
CA – Corticeira Amorim
EU – European Union
FSC – Forest Stewardship Council
GDP – Gross Domestic Product
ICNF – Instituto de Conservação da Natureza e da Floresta
INE – Instituto Nacional de Estatística
R&D – Research & Development
1 1. Executive Summary
Nowadays, it is no longer possible to see innovation and sustainability as two distinct concepts. The importance given to these two concepts has been growing, and sustainable innovation starts to become a top of mind priority in a business world with finite resources. A great example, where this priority has been taking place, is the cork industry. As common sense, the cork industry uses the cork as a raw material for all products manufacturing, so it is highly dependent of this natural resource. This fact and the increasing need for innovation, in this sector, lead to a profound change in cork industry, bringing a new way of thinking in today’s business. One of the first companies to adopt sustainability as a working philosophy was Corticeira Amorim, which will be, from now on, also referred as CA, Portuguese cork Company or Company. This Company is the leader cork company in Portugal, and one of the best cork companies around the world. CA is very appreciated internationally not just because of the high quality of their products but also because of its concern given to sustainability issues. From very early, CA realized that would be just possible to be a leader in this industry with innovation and, at the same time, with a huge concern about sustainability.
Taking this into account, the main purpose of this work is to explain how companies can have a sustainable innovation and, at the same time, which kind of sustainable innovation type are possible to exist in a company. As previous mentioned, the cork industry is an industry where both innovation and sustainability are crucial, and since CA is one of the best well know companies in this sector it is important to “test” and observe how this company innovate in a sustainable way.
To meet effectively the purpose of this thesis, it will be used a conceptual framework about sustainable innovation. This theoretical conceptual framework, explain the relation between sustainability and innovation giving several types of sustainable innovation orientation’s strategies for a company to follow, in order to pursue a sustainable innovation.
Through the direct application of the sustainable innovation framework to the CA, it will be possible to conclude that the company follows a sustainable innovation orientation strategy, by reducing the consumption of raw-materials, the use of organic materials as an input on the production process of current products and/or new products and also the paradigm shift to a circular economy. The existent relation between innovation and sustainability in Corticeira Amorim, and also the importance given to this relation, as being the long run survival of the
2 cork sector, can be proven by the strategic approach that this company has to eliminate waste and pollution, in a model moving toward a circular economy.
This recent model has been study for the last few years and, since 2014, has becoming one of the main concerns of the European Union. This is a living proof that Corticeira Amorim is devoted to improve its production process, creating a strong sustainable innovation that can lead the sector to surpass the future challenges that might jeopardize the survival of the cork industry.
3 2. The Problem Definition
Nowadays, for companies to survive in a so competitive world, growth is an imperative thing and it is not an option (Bain and Company, 2015). Business growth achievement is, in this context, essential for organizations. In fact, companies are now, doing a special focus on managing resources and capabilities to ensure a strategic position in the market and a focus on innovation. If companies want to be competitive they must invest in innovation to fulfil client’s needs with sophisticated and modern products / services, going beyond their expectations.
Although, it is not enough to recognize the role of innovation in today’s business. Recognize the impact of these innovations in the sustainability of the industries is very important too. Furthermore, the environmental and social impact of innovation, sometimes could not guarantee the sustainability of the industry in the long run. Along with this, a new debate is taking place among companies. Companies now are discussing how they can link this two concepts, innovation and sustainability, in the way that they can be executed together without jeopardizing competitiveness objectives. Innovation is an important part of every organization but cannot be used so easily without control.
If companies do not be aware to environmental and social questions, the future of its industries may be compromised, as in the case of industries that use natural resources as its core business (wine industries, cork industries, and others). The cork industry is totally dependent of natural resources but, at the same time, its business activity has a direct impact in the environment. If cork companies innovate in their activity but do not be aware to sustainability and environment issues, how can the cork industry be sustainable in the long-run? It becomes essential to understand the practical relationship between innovation and sustainability and discover how companies can innovate and, at the same time, guarantee the sustainability of their business, especially those ones that use natural resources with a direct impact in the environment.
4 3. Literature Review
3.1. Innovation
3.1.1. Concept and characteristics
It is not very easy to define the concept of innovation, being this concept a quite diverse and depending mostly on its application. According to Godin (2008), “innovation is everywhere”, since it is possible to find innovation between several fields, such as in scientific and technical literature, in social science (sociology, history, management and economic) or in humanities and arts. Nowadays, the word “innovation” is part of the everybody’s vocabulary, all people and organizations know the power that can be brought from a wisely use of it. Innovation is something that is fully introduced into people's daily lives and it is difficult for people to live without it and for companies to compete without it. For these reasons, innovation is now a central idea in people mind and companies’ agenda.
In constant changing world, driven by a need to reevaluate how companies can differentiate themselves from competitors, there is no doubt that innovation makes the difference, turning this concept essential in every industry (Fisher, 2008). Although, it is very important to clarify that innovation and innovation processes do not have the same meaning that continuous improvement has. People very often confuse these two concepts, but they are different. To characterize innovation as continuous process it is necessary that this innovation process cause a noteworthy effect on the pricing structure, in the market share and in the company’s profit. The concept of continuous improvement does not imply to create competitive advantage in the long-run, but implies to maintain the competitiveness of the products and services by reducing waste in terms of costs and time.
Innovation or the need to innovate can be driven by a number of factors that can differentiate from situation to situation. The need for innovation allows organizations to question themselves about their innovation capabilities and potential. In fact, “managing creativity and capabilities,
like innovation capability, is one of the basic elements of an innovative organization” (Saunila
and Ukko, 2012: 355). In line with this, developing innovation capabilities is one of the main source to achieve an innovative product or service and become a business leader (Laforet, 2011). For Yliherva (2004), innovation capability is an organization’s intangible property and, at the same time, is the ability that the organization has to exploit that property in a way that it will enable the company produce systematically new innovations. In turns, for Lawson and Samson (2001:384) innovation capability is “the ability to continuously transform knowledge
5
and ideas into new products, processes and systems for the benefit of the firm and its stakeholders”. Another approach is given by Rangone (1999:235) that defines innovation
capability as “an organization’s ability to develop new products and processes, and to achieve
superior technological and management performance”. Skarzynski and Gibson (2008) divide
innovation capabilities into four categories: leadership and organization, people and skills, process and tools, and culture and values. Furthermore, there are several issues that can impact on innovation, which can become either promoters or obstacles, such as people and the atmosphere, the physical environment, mental models, and decision-making and power structures (Sta ̊hle et al., 2004). According to Paalanen et al. (2009), to understand innovation capabilities it is important to evaluate the subcategories that can influence them, considering for that the absorptive capacity and external knowledge, the organizational structures and culture, the leadership and communication and the individual creativity and innovativeness. On the other hand, Tura et al. (2008) develop a different statement regarding to how we should look to innovation capability. The author proposes to look through three subcategories: openness/creativity, knowledge/expertise, and operationalization capability. The first subcategory covers the capabilities needed to exceed the existing solutions and new possibilities. The second subcategory comprises the capabilities to build innovation through acquired knowledge. The third subcategory describes the capability that allows organizations to exploit achieved knowledge base through the discovery and introduction of new applications.
Taking into consideration these previous definitions of innovation capability, it is possible to summarize that the concept of innovation capabilities englobes innovation potential, innovation process and results of innovation process (Saunila and Ukko, 2012).
The innovation potential is one of the main fields of study in literature according to innovative organizations (Zizlavsky, 2011; Saunila and Ukko, 2012; Stanislawski and Lisowska, 2014; Valitov and Khakimov, 2015). For example, Zizlaysky (2011: 1019), through a profound study about innovation, reaches a statement where “innovation potential is considered a suitable
characteristic of the company’s existing innovation environment.” The environment assumes
as a crucial aspect in which innovations can be or not created, developed and implemented. The potential beyond innovation capacity refers to the importance in the sum of all resources inside the company and to the ability of its use for the company’s development (Stanislawski and Lisowska, 2015). Innovation potential management allocated for organizational intends cannot be neglected. In fact, it is an integral part of innovation management and disposes skills
6 that allow solving issues related to innovative strategies of planning and implementation for the organizational sustainable development (Valitov and Khakimov, 2015). Valitov and Khakimov (2015: 717) state that, innovative strategies development is based on the influence
“of company opportunities and innovative potential, analysis of enterprise external environment for their possible implementation in strategic decision-making”. More recent
studies indicate that the factors that englobe the innovation potential of an organization should be divided into five categories (Saunila and Ukko, 2012: 359):
1. Leadership and decision-making processes; 2. Organizational structures and communication; 3. Collaboration and external links;
4. Organizational culture and climate; 5. Individual creativity and know-how.
The innovation process discusses the importance of systems and activities on how organizations make use of the identified innovative potential to pursue innovations (Saunila and Ukko, 2012). According to Davila et al. (2013) the innovation process includes innovation creation, analyzing and controlling related functions. Basically, for the author, the innovation process main role is to guarantee an efficient communication, coordination and collection of experience of the inter-activities. For Koen et al. (2001) the innovation process must be divided into three phases: frontend, new product development and commercialization. There are several innovation process models, but probably the most well-known is Robert Cooper's Stage-Gate model (figure 1).
Figure 1 - Robert Cooper's Stage- Gate Model: Innovation Process
7 This innovation process model comprises five stages and five gates or decision points. The five stages are scoping, build business case, development, testing and validation, launch and post-launch review. The biggest advantage of this model is because it divides the roles of the team project to the executives’ roles. The team project is responsible for finding the innovation that will best meet their project objective and executives are responsible for the gate decisions, they are responsible for taking the best decisions for the organization (Midgley, 2010: 73). The third element of innovation capability is the results of innovation process and here, according to Sta˚hle et al. (2004), innovation can be considered as an improvement when is it used in the price structure, in the company’s revenue and to achieve a higher advantage in competition in the market.
After understanding the concept of innovation and the elements that comprise it, is similarly important to explain the types of innovation. As previously stated, “innovation is everywhere”, so it is expected that not all innovations are equal. Davila, Epstein and Shelton (2006), in their book “Making Innovation Work, How to Manage It, Measure It, and Profit from It”, argue that there are three types of innovation. These three types of innovation are incremental, semi-radical and semi-radical. For the authors, “achieving semi-radical or semi-semi-radical innovation requires a
different mix of business model and technology change than incremental innovation” (Davila,
Epstein and Shelton, 2006: 15). The incremental innovation is considered as “improvements
within a given frame of solutions, doing better what we already do” (Norman and Verganti,
2012:5). Basically, the incremental innovation is regarding to small improvements and to problem-solving. In turn, the radical innovation is considered as “a change of frame, doing
what we did not do before” (Norman and Verganti, 2012:5). Here, this type of innovation
englobes significant changes with an impact on business and as well in the technology used (Engen and Holen, 2014). “Radical innovation brings new domains, new paradigms and
creates a potential for major changes and incremental innovation is how the value of that potential is captured. Without radical innovation, incremental innovation reaches a limit. Without incremental innovation, the potential enable by radical is not captured” (Norman and
Verganti, 2012:6). So, in line with the authors, both types of innovation are important for an organization.
At the present time, there are a tendency to increment quality and performance in innovation.
“The increased importance of innovations the significant problem clarifies – the inability to ensure innovation management in right time and quality in the early stage of innovation process” (Batraga, Braslina and Viksne, 2014: 31). Consistent with the authors, in nowaday’s
8 business, the innovation process must go hand in hand to innovation quality and innovation performance. The innovation quality “indicates when an enterprise endeavors in the pursuit of
innovation through creation of new products, processes or management modes, whether the innovation can satisfy the parties of interest such as the customers, the employees and the suppliers” (Shwu-Ing and Chiao-Ling, 2001:52). If this occurs, so it means that the innovation
has quality, otherwise, innovation does not have quality. Regarding to innovation performance there are several different views about how to measure the performance of innovation. In a common sense, to determine if innovation has performance there are three items of evaluation (Shwu-Ing and Chiao-Ling, 2001:55):
Innovation success rate – “The success percentage of innovative product or service
within a specific time period”;
Market share – “The ratio or percentage of a company’s innovation product or service
sold on the market of the similar products within a specific time period”;
Innovation ratio – “The ratio between income and costs from innovation investment
within a specific time period”.
3.1.2. Innovation and competitive advantage
Since a few decades ago, reaching competitive advantage start to become one of the main goals of an organization. Tushman & Nadler (1986:92) stressed that “organizations can gain
competitive advantage only by managing effectively for today while simultaneously creating innovation for tomorrow” and implied that “there is perhaps no more pressing managerial problem that the sustained management of innovation”. According to this, Hana (2013)
conclude that, to have innovation and to use it as competitive advantage, organization must do an efficient use of company’s resources as well a good use of the acquired experience and knowledge. By doing this, organizations will increase their ability to dodge and exceed obstacles that can appear through the use of innovation.
Innovation is an imperative source to achieve competitive advantage and will, surely, continue to be a way for companies to survive due the increasingly and extremely competitive business environment (Tidd et al., 2006). The most important characteristics of innovation in business include:
A strong relationship between market performance and new products; New products help maintain market shares and improve profitability;
9 Growth also by means of non-price factors (design, quality, individualism, and my
others);
Ability to substitute outdated products (shortening product lifecycles);
Innovation of processes that lead to production time shortening and speed up new product development in comparison to competitors.
Managers need to look to innovation as a source to popping up organizational competitiveness that will allow, over time, to develop some kind of competitive advantage. Skarzynski and Gibson, (2008: 4) argued that “the difficult challenge for most organizations is how to turn all
that rhetoric into hard-nosed, revenue-growing reality”. Additionally, they concluded that “by producing a constant stream of breakthrough innovations that compound over time to build a formidable competitive advantage”. But most importantly, the authors stated that, sometimes
it is necessary to stop, study, evaluate, develop and enduring capability for innovation instead of being all the time taking effort to develop new innovative bridges to break-through competitors. As mentioned in the previous chapter, Skarzynski and Gibson (2008) pointed out that, innovation capabilities will drive companies to achieve profitable revenue growth and, most importantly, enabling the company to maintain a competitive advantage over the longer term. To be successful, innovative organizations must observe attentively its external environment, in order to find trends and gaps that will allow them to change and create new ways of doing innovative things (Hyde, 2013).
Hyde (2013) conducted a study about the new forms to achieve competitive advantage through in-depth study of innovation theories, where reached the conclusion that organizations need to pay attention to three different innovation theories: Blue Ocean Strategy, Disruptive Innovation and Strategic Innovation. These three theories have shifted how organizational strategic management thinks, in order to achieve sustained competitive advantage. Furthermore, with these theories it was possible to conclude that the easy way for organizations to achieve competitive advantage is through innovation (Shqipe, Gadaf and Veland, 2013). By looking to innovation in a product perspective, Reguia (2014) said that companies become obliged to adopt product innovation, as well to create a favorable environment through:
Encouraging R& D;
Providing financial sources to support new innovations; Putting efficient programs and policies;
10 So, in today’s business the word innovation is crucial to have a good competitive advantage and to guarantee a good business activity in the long-term. Customers, are now more demanding in terms of innovation and quality, searching for high quality and high innovative products or services. In a market full of competition, it is important that innovation, quality and performance go hand in hand, to offer products/services with perceived-value for customers and to increase the organization’s market position – “firm’s competitive advantage largely
depends on their ability to innovate over time” (Le Bas, Mothe and Nguyen-Thi, 2015:111).
3.2. Sustainability
3.2.1. Several points-of-view
Although the concept of sustainability has been recognized by its appearance in a relatively modern era, the sustainability-oriented concepts have been studied by several times over the last decades. Studies made about this subject cannot define when the concept of sustainability was born. What is actually known, is that sustainability has been espoused by many religions, modern and ancient, Eastern and Western, that promote respect towards nature, people, and society at large (Gottlieb, 1996; Mebratu, 1998).
As said by Kidd (1992), sustainability can be considered as a modern movement in today’s society and have derived from six different roots: the carrying capacity root, the resource root, the biosphere root, the critique of technology root, the “no growth” or “slow growth” root, and lastly the eco-development root. Due to the similarity between some of them, Kidd (1992) identifies, for purposes of simplicity, that there are two major branches from which the modern construction of sustainability is derived. The first one, will carry with capacity and resource root and the second one, with the normative emphasis of the latter four (i.e. the biosphere root, the technology root, the “no growth” and “slow growth” root, and the eco-development root). In turn, Smith and Scharicz (2011: 74-75) has a more organizational approach of sustainability. The authors define sustainability as being: “the result of the activities of an
organization, voluntary or governed by law, that demonstrate the ability of the organization to maintain viable its business operations (including financial viability as appropriate) whilst not negatively impacting any social or ecological systems”.
Another definition of sustainability is given by Crane and Matten (2016: 33) define sustainability as “the long-term maintenance of systems according to the environmental,
11
economic and social considerations.” In line with these authors it is possible to identify
economy, society and environment as the three pillars of sustainability, which both economy and society are constrained by environmental limits (Beattie 2015):
The social pillar of sustainability – this pillar describes the capacity that societies have to persistently accomplish a good social well-being. By achieving social sustainability, it is possible to ensure a social well-being of a country and organizations can guarantee its future in the long term.
The environmental pillar of sustainability – this pillar explains that if people and companies want to live in a true environmental sustainability, it is necessary to ensure that they are consuming its natural resources (raw-materials, water, land and energy fuels). Although, it is necessary to make a balanced used of the resources and reduce the environmental impact of an organizations facilities, products and operations to achieve environmental sustainability.
The economic pillar of sustainability – this pillar is used to outline strategies that enable a consumption of socio-economic resources to their best benefit. Basically, to achieve the economic sustainability it is necessary that an organization use its resources efficiently and responsibly to have a sustainable business activity and produce an operational profit. The economic sustainability involves to guarantee that the business activity produce profit and, at the same time, to ensure that business operations do not generate social or environmental problems that could prejudice the future of the organization.
According to the previous definitions and approaches, sustainability can have many different points of view. Scholars studied several views to relate sustainability in a business context. An approach that takes into account the economic, environmental and social aspects of sustainability is complex and needs a strong effort from organizations in order to integrate sustainability at multiple levels and throughout the organizational system. For this approach, organizations cannot simply go through legal and regulatory requirements. It is needed more than that, it is necessary to look in a more proactive stance towards sustainability.
3.2.2. Sustainability in today’s business
The McKinsey Global Survey (2011), “The Business of Sustainability”, stated that nowadays “more companies are managing sustainability to improve processes, pursue growth, and add
12
value to their companies rather than focusing on reputation alone”. In fact, in today’s business,
managers are becoming more and more aware of the needs to broaden their goals, but this time beyond the traditional financial expectations. The term of sustainability has entered into the business world and, every day, an ever-increasing number of firms are realizing the importance of the relation between financial goals and social and environmental goals (Bansal, 2005; Hoffman, 1999; GRI, 2011).
Consistent with what it was said in the in the previous chapter, it is necessary that organization follow a proactive. Bonn and Fisher (2011), argue that if organizations want to become more sustainable, some changes have to take place, more precisely, organizations should guarantee that sustainability is integrated into the strategy process from the beginning and that is addressed on an ongoing basis. More precisely, the organization’s vision needs to reflect the organization’s commitment to sustainability. Strategic changes have to take place in order to use sustainability as an integrative part of the strategic decision-making process, as well as the strategy content. This wills implies some changes that, sometimes, can be difficult to understand. Sustainability initiatives need to be supported by the organizational culture in a proactive way that enables the trade-off between shareholder’s objectives and sustainability’s objectives.
On the word of Eccles, Ioannou and Serafeim (2012) the organizations that have a high sustainability level are “characterized by a governance structure that explicitly and directly
took into account the environmental and social performance of the company, in addition to financial performance”. Furthermore, in their article “Is sustainability now the key to
corporate success?” on The Guardian Journal, the authors Eccles, Ioannous and Serafeim (2012) said that high-sustainability organizations “have particular attention to their
relationships with stakeholders – such as employees, customers and NGOs representing civil society – through active processes of engagement” and “are more likely to measure and report on environmental and social metrics in addition to their financial results”.
Currently, in the business environment, the concept of sustainability is moving from the corporate side-lines into the mainstream, since several organization around the world companies are increasingly realize that environmental sustainability is a key attention. Although, to develop an effective management based on sustainability it is necessary to address both decision-making and governance and, additionally, the sustainability in organizations must be integrated into business planning, management information and control systems (IISD,
13 2001: 5). In order to put this into action, organizations should take the following seven steps (IISD, 2001: 5-15):
1. Perform a stakeholder analysis;
2. Set sustainable development policies and objectives; 3. Design and execute an implementation plan;
4. Develop a supportive corporate culture;
5. Develop measures and standards of performance; 6. Prepare reports;
7. Enhance internal monitoring processes.
So, nowadays it is crucial for all organizations to become a high-sustainability organization, in order to guarantee its future and its business activity in the long term. Some examples of high-sustainability organizations are:
Coca-Cola – “The drinks company has improved the efficiency of its water use by
20% and identified the need for a rigorous third-party evaluation of its water management approach” (The Guardian, April 2014).
General Electric – “GE is using its human resource department to integrate
sustainability into the company's culture, ranging from hiring practices and training to employee wellbeing programs” (The Guardian, April 2014).
PepsiCo – “The food and beverage company presents its sustainability strategy and
goals during its annual shareholder meeting and identifies and discloses climate change, water scarcity and public health issues as core sustainability challenges in its annual financial filings” (The Guardian, April 2014).
General Mills – “The foods company recently released a set of sustainable sourcing
commitments that begins with a robust risk assessment process undertaken in partnership with a third party. This approach led the company to prioritize ten commodities, including oats, wheat and corn, that they plan to source sustainably”
(The Guardian, April 2014).
Dell – “The computer company integrates alternative, recycled and recyclable
materials in its product and packaging design, improvements in energy efficiency, and design for end-of-life and recyclability. One of the company's commitments is to reduce the energy intensity of its product portfolio by 80% by 2020” (The
14 4. Conceptual Framework
Based on the literature review it is a fact that innovation is needed for any organization to compete against its competitors, to improve processes, fulfil customers, create value and go along with market trends. Although, in parallel to the issue of innovation there is the issue of sustainability, which has been taking place in manager’s mind. Nowadays, it is extremely important to understand practical the relationship between these two issues, because for a company to be well successful in the long run it is not enough to innovate, but also it necessary to have a sustainable innovation. An innovation capable to guarantee the business sustainability and also the environment in which the company operates. This relationship is even more important to be understood in companies, which the main activity depends on the use of natural resources, such as in the cork, wine, oil or wood industry.
To meet effectively the purpose of this thesis, it will be used a conceptual framework for sustainable innovation that will allows to understand the different types of sustainable innovation, the several stages of sustainable innovation and the possible strategies to have a sustainable innovation (from the link between the types of innovation with its several stages). This conceptual framework was proposed by Rajan Varadarajan, in his study “Innovating for Sustainability: a framework for sustainable innovations and a model of sustainable innovations orientation”, in 2015. The author highlights the importance given, in recent years, to innovating for environmental sustainability. Furthermore, the author tries to discover how organizations can be successful through a sustainable innovation strategy, making the most successful company the one which have a sustainable innovation orientation. In other words, the one which can have a sustainable process innovation performance and a sustainable product innovation performance.
The figure 2, “Conceptual framework for sustainable innovation”, comprises two main points, the three types of sustainable innovations and the five major sustainable innovations opportunities stages. Additionally, the three types of innovation englobes nine finer gradations of sustainable innovation – “A1.1: Reduction in the amount of use of renewable resource; A1.2:
Reduction in the amount of use of non-renewable resource; A2.1: Elimination of an ecologically harmful ingredient from a product; A2.2: Elimination of a filler ingredient from a product; A2.3: Elimination of the need to use a complementary product; A3.1: Substitution of a non-renewable resource with a renewable resource; A3.2: Substitution of an ecologically more harmful non-renewable resource with an ecologically less harmful non-renewable
15
resource; A3.3: Substitution of a less abundant non-renewable resource with a more abundant non-renewable resource, subject to the substitution not having a negative impact on the overall sustainability profile of the product; A3.4: Substitution of source of raw material from below ground mined with above ground mined - reuse of resources extracted during the post use/consumption stage during the upstream supply chain, production, downstream supply chain, and/or use/consumption stages” (Varadarajan, 2015:7). The first type of sustainable
innovation is the resource use reduction or resource use efficiency innovations. By adopting this type of innovation the company uses innovations that have a lower environment impact, with a focus in the reduction amount of A1.1 or A1.2. The type is the resource use elimination innovation. Here, the organization eliminate the use of a resource as an input, following a A2.1, A2.2 or a A2.3 gradations method. The third type is the resource use substitution innovation, where the company substitute a resource used as input with another resource, opting by a A3.1, A3.2, A3.3 or A3.4 gradation method. In turn, the five major sustainable innovation opportunity stages (upstream supply chain, production, downstream supply chain, use/consumption and post use/post consumption), also presented in Figure 2, illustrate the several phases in which sustainable innovation types can occur. When selecting one type of sustainable innovation with one stage of sustainable innovation it is possible to define a sustainable innovation strategy. For example, if a company choose to follow a resource use reduction, by reducing the use of renewable resources in the production stage, the company will adopt an A1.1B2 sustainable innovation strategy.
Figure 2 - Conceptual framework for sustainable innovation
Source: Varadarajan, R. 2015. Innovating for sustainability: a framework for sustainable innovations and a model of sustainable innovations orientation. Academy of Marketing Science.
16 So, this framework allows companies to understand which is the best strategy to perform a sustainable innovation, by choosing the type of sustainable innovation and choosing the stage in which it should occur. By following one or more of the several possible strategies presented in this framework, organizations can innovate and, at the same time, be sustainable, enabling them ensure the competitiveness, survival and success of their business in the long term. For Varadarajan, a company can have sustainable innovation outcomes, when perform correctly a sustainable innovation strategy. By performing it correctly, companies will achieve an efficient sustainable innovation orientation, that will result in a sustainable process innovation performance, in a sustainable product innovation performance and in an employees’ performance. In turn, the sustainable process innovation performance will bring an environment performance’s outcome and the sustainable product innovation performance will also bring environment performance’s outcome and marketing performance’s outcome. Finally, all these outcomes will result in an increase of the financial performance.
17 5. Methodology
5.1. Research purpose
As previously mentioned, the purpose of this dissertation is to understand the relation between innovation and sustainability and to explain how companies can have a sustainable innovation, assuring the future of the industry in which they operate. In this specific case, the objective is to “test” and observe the relation between innovation and sustainability in Corticeira Amorim in order to explain how this company can have sustainable innovation and stress why companies should follow a sustainable innovation orientation strategy.
To meet effectively the purpose of this thesis and to help to explain the theory in a way that is clearly defined, it is used a conceptual framework about sustainable innovation. This conceptual framework was proposed by Rajan Varadarajan (2015), in his study “Innovating for Sustainability: a framework for sustainable innovations and a model of sustainable innovations orientation”, and explains the relation between innovation and sustainability, stressing that the most successful company is the one which has a sustainable innovation orientation. By using this theoretical framework, it will be possible to conceptualize the research problem, providing the theory that will bear out this investigation.
According to David de Vaus (2001), the theory testing approach starts with a theory and will use theory to guide which observations to make and, in turn, the observations should provide a test of the worth of the theory. Consistent with this, and since the objective is to test and to explain an existing theory, the research is based on a theory testing approach. In this specific situation, it is used a theory-testing research model to confirm the relation between sustainability and innovation, and to explain, by applying the theory to a real business situation (Corticeira Amorim company), how and why companies should follow a sustainable innovation.
5.2. Research strategy
Based on Saunders (2003), the research strategy is a general plan that helps researcher in answering the research questions in a systematic way. Moreover, the research strategy is also helpful, since it allows the use of specific data collection methods to support the arguments (Saunders, 2003).
As mentioned by Williams (2007), there are three approaches to conducting research: quantitative, qualitative, and mixed methods. The qualitative research tends to use all
non-18 numeric data and. In turn, the quantitative research tends to use the quantification in the gathering of data (Bryman, 2012; Saunders et al, 2009). Considering this, for this dissertation it is used mainly a qualitative research method. The qualitative research, enable to have a better deductive approach and to have a more comprehensive knowledge about the problem in study, allowing to go further on the research and analysis made. It also help to organize collected information that should allow to, in the end, develop and explain a theory, which will provide strong tools to make valid statements and recommendations. The quantitative research is also used, but only a few of it, in order to have some insights about financial information, regarding to market and industry evolution and about company financial performance.
5.3. Case study research
According to Gerring (2007), the case study research is the combination of principles and practices that provide the general knowledge of the case in study method and, will give specific tools for its successful implementation in the real world.
Furthermore, and consistent with Louise Fitzgerald (1999), the case study research can employ several forms and sources of data. The research can be built up using descriptive statistics and facts, previously drawn from secondary sources (data that was originally collected for a different purpose and the can be reused for another research question). The case study research can also use primary data and, in this case, the researcher is responsible for the original data collection that should be handle for a specific research goal (Joop J. Hox & Hennie R. Boeije, 2005).
This method does not involve statistical hypothesis testing since the data is collected from qualitative research. Because of that, many researchers have been criticizing this method as being unreliable and to general (Creswell, 2013; Grant & Booth, 2009; Zainal, 2007).
To avoid some of these problems, case study investigators such as Robert E. Stake (1995), and Robert K. Yin (1984), suggested techniques to allow the researcher to organize and conduct the research successfully. In line with the authors, a case study research must follow a six steps structure: Determine and define the research question or questions; select the sources of data gathering and analysis techniques; prepare to collect the data; collect data in the field; evaluate and analyse the data and prepare the report.
Considering the above, this dissertation follows a case study research for testing a theory. It starts by defining the research questions –“Why companies should follow a sustainable
19
innovation?”, “Why innovation and sustainability are related?” and “Why there is a need for a sustainable innovation strategy in today’s companies?”. After it is understood the sources of
data gathering and what type of analysis techniques should be used – in this case, it is used both secondary and primary data and also it is used of a theoretical conceptual framework to study and analyse the problem. Then, it will be prepared the methods to collect the data and the data is collect in the field – collection of primary data by using the interview and observation method. After collecting the data, the data is analysed, linked with the theory and discussed, in order to draw and communicate the conclusions about the problem in study.
5.4. Source of data in research
Along this dissertation, it is used both primary and secondary data, allowing to better understand the variables that affect the research in study.
Concerning to the secondary data, there real advantages on the use of this research technique, like the fact of most of the information is available in data archives being much more easy and timeless to access all this information. Nevertheless, it is important to pay attention to the quality of the gathered data, for instance, complexity of data and difficulty to be treated.
The secondary data used in this dissertation is critically evaluated and collected from books, scientific articles, firm’s annual reports and different internet sources. All the information collected through secondary data, help to have a better insight about the cork industry in Portugal and around the world, as well, to conduct the literature review. In turns, the primary data used allows to have a more detailed information regarding to the issues in study.
5.5. Data collection
There are several qualitative methods in order to develop and have a better in-depth understanding and to explain the issues under study (by means of their textual interpretation), which the most common are the interviews and the observation method (Creswell Oaks, 2007). In order to meet the purpose effectively, the collections methods chosen are the interview and the observation method.
For this dissertation two interviews were made, one with Corticeira Amorim and another with a cork producer and supplier. The first interview, was with a board member of the Innovation department of the Company. The main objective of this interview was to get more detailed information of CA, understand some variables of the business and its relation, with especially
20 concern to the concepts of innovation and sustainability, and to understand if the company follows a sustainable innovation strategy. The second interview was with a family business company, more specifically with a cork producer and supplier. The main objective with this interview was, taking into account the information provided by CA, in the first interview performed, understand in more detailed the issues that impact directly the cork production, to comprehend how the sector has evolved in terms of cork’s production and sales also to realize the pressure that is made on the farmstead by the producing companies.
In order to request authorization to conduct the first interview, it sent an e-mail (appendix 1). For the second interview, it was not necessary for the reason that it was a close person who provided the interview.
According to P.Gill, K. Stewart, E. Treasure & B. Chadwick (2008), there are three types of interviews: structured, semi-structured and unstructured. Therefore, for gathering information with Corticeira Amorim it was used a semi-structured interview (appendix 2), which allowed to collect more valuable and deep information through the use of a style that was considerably conversational. In the second interview it was also used a semi-structured interview (appendix 3), making possible, once again, to have an opportunity for both interviewer and interviewee discuss the issues in more detail. Furthermore, in order to ensure an effective and insightful interview, it was used an interview guide for both interviews (appendix 4).
As previously mentioned, in addition to the interviews, it was also used the observation method to collect primary data. According to Saul McLeod (2015), there are three types of observational methods: controlled observations, natural observations and participant observations. In this specific case, it was used natural observation. After the interview, the director of innovation offered for a guided tour. This guided tour included, first a visit to the innovation and investigation department, where the new products and new solutions to cork are developed, and then a visit to the Amorim Cork Composites, in order to know this business unit in more detail. Here it was possible to observe how the company can have a sustainable innovation strategy, since it is the business unit where the waste is used for innovation with a higher impact on the business sustainability.
21 6. Data Analysis
6.1. The cork
Cork is a natural material derived from the cork oak tree, extremely versatile, capable to be used in numerous situations. Cork consists of irregularly shaped spaced cells having an average of 14 sides and the large amount of dead-air space, is what makes the cork so useful, such as an insulation material for both temperature and noise.
The cork tree is ready for its first harvest when it is about 20 to 25 years old. Generally, the first harvest has lower quality and, nowadays, it can only be used to make agglomerated cork products. The second and subsequent harvests occur at a 9-year interval and, at this time, the tree layer reaches a thickness of 2-5 cm, that is enough to be used for industrial purposes. In the end of the harvest process the trees are unharmed, and they continue producing cork for an average of 150 years.
Nowadays, most of people is familiarized with the cork, especially because of its most application in stoppers of wine bottles, which represents about 70% of all cork production. Although, the cork’s use is much more beyond this. The cork, currently, in this modern and sophisticated society, is proving to have a wide range of applications. With the huge investments in R&D (Research and Development) and with the request for a new innovative and efficient production systems, the cork industry has now a considerable selection of products and new applications. This occurs, not only in wine industry, but as well in construction, decoration, transports, fashion and sports sector. Some of the several products from de cork production are flooring materials, shoe insoles, roofing panels, gaskets, safety helmet liners, bottle stoppers, dartboards, bulletin boards, and cores for golf balls and baseballs.
Nowadays, there are some products, which are made of artificial lower cost fabrication materials, trying to enter to the market. However, no general substitute has been developed for cork that can be used in diverse applications.
Considering all these developments in the cork industry, several industries are now interested in this product. The growth of the demand during the last years, have forced the cork producers to diversify its product portfolio and at the same time to innovate it. Additionally, this situation strengthens the economic and environment impact of some Mediterranean countries, where the majority of the cork oak forest can be find.
22 6.2. The cork industry
The contemporary origins of the cork industry are in France, linked to the discovery of the sparkling wine in the region of Champagne (Benedictine monk Dom Pierre Perignon, late 17th century), where they started to use cork stoppers, instead of traditional wood, to seal the bottles.
Cork Industry has changed a lot over the past few centuries, and according to Zapata (1996 and 2002), is possible to identify four different industry’s stages. The first stage took place between the years of 1680 and 1730 and was named as Original development stage of the cork manufacture. Between 1730s and 1900s, Spain was the biggest producer, leading to the second stage of absolute hegemony of the Catalonia Industry. The third stage was marked by the entry of new world’s market players, such as U.S., Germany and England. These players expanded their position as cork’s transformers with new technical improvement, which involved the production of cork agglomerates. Spain was one of the last countries to access to this technical change, which is one of the reasons that led Spain to a state of relative hegemony in the Industry between the years 1900s -1936s. The fourth and final stage begins to gain strength since the year of 1936 and has been extended over the past few years, with Portugal taking control of most of the cork manufacturing process.
Cork Industry is characterized by two distinctive subsectors that act upstream (preparation) and downstream (agglomerates). The innovations in this industry and the appearance of new products or applications, has happened slowly. More recently, as a consequence of the increased demand for substitute products for cork stoppers, associations and companies have been seen obliged to review their strategies. The sub-clusters for building materials, clothing and footwear have become increasingly competitive in both the domestic and international context, becoming these days a stronger destination for cork products.
6.2.1. The cork industry
According to APCOR, the world cork forest reaches approximately 2,139,942 hectares, distributed by seven countries, being the four main producers: Portugal, Spain, Morocco and Algeria (table 1).
23 Table 1 - Cork Forest Area
Regarding to cork’s producers, Portugal and Spain are the major producers, having 34% and 27%, respectively, of the total plant area (table 1). Portugal has the higher percentage of annual cork production and, according to APCOR, around 50% of the cork industry comes from Portugal, 30% from Spain, and the remaining 20% from other countries. Furthermore, as can be seen in table 2, the West Mediterranean cork oak landscapes produce, on average, over than 200,000 tons of cork annually (table 2).
Table 2 - Global Cork Production CORK OAK FOREST AREA
Country Area (Hectares) Percentage
Portugal 736.775 34% Spain 574.248 27% Morocco 383.120 18% Algeria 230.000 11% Tunisia 85.771 4% France 65.228 3% Italy 64.800 3% Total 2.139.942 100%
CORK PRODUCTION BY COUNTRY
Country Annual production (tones) Percentage
Portugal 100,000 49.6 % Spain 61,504 30.5 % Morocco 11,686 5.8 % Algeria 9,915 4.9 % Tunisia 6,962 3.5 % France 5,200 2.6 % Italy 6,161 3.1 % Total 201,428 100%
Source: Adapted from APCOR - Cork Information Bureau 2015 Source: Adapted from APCOR - Cork Information Bureau 2015
24 Besides of having the highest cork oak forest area and the highest annual cork production, Portugal exports about 95% of all its production, making it the world’s leader country in the export of this natural resource (APCOR, 2015).
Regarding to market share, Portugal is also a leader, presenting a market share of 62.8 % in 2014, followed by Spain with 16.6 % (table 3). The world’s total exports, in 2014, were over from EUR 1,346.6 million, which means an increase of 3.1% compared to 2013, equivalent to more than EUR 40.7 million.
Table 3 - World Cork Exports
Considering now the imports (table 4), the major importer is France, having imported, in 2014, EUR 221.2 million of cork. Followed by France is EUA, which the imports recorded a value of EUR 211 million of cork in 2014. Portugal was the fourth largest importer of cork in the world in 2014, having imported a total of EUR 127.6 million of cork. Furthermore, it is important to explain that the imported product can be a final product (e.g., France is one of the biggest importers of natural cork stoppers for the wine industry), or a by-product (e.g., Portugal
WORLD CORK EXPORTS 2014
Country Million (€) Country Share (%)
Portugal 845.3 62.8 % Spain 223.6 16.6% France 63.6 4.7% Italy 42.6 3.2% Germany 27.7 2.1% USA 23.1 1.7% Morocco 16.2 1.2% China 14.8 1.1% Belgium 9.4 0.7% Chile 9.3 0.7% Austria 7.3 0.5% United Kingdom 5.8 0.4% Switzerland 5.5 0.4% Others 52.5 3.9% Total 1,346.6 100%
25 buy agglomerated cork, which is then processed and subsequent exported in the form of final products for the building materials sector).
Table 4 - World Cork Imports
6.2.1.1. Analysis of the five forces affecting the cork industry
With the appearance of new markets in the new millennium, the competition in cork industry has increased. It is important to refer that in some countries cork industry is not very intense, such as Portugal which has a few large companies holding the largest market share. Nonetheless, the growing fact that cork is now even more recognized in several fields, like in the wine and in the building materials industry, is leaving the sector more competitive with a feel of great rivalry, especially among alternative or substitute products produced internationally. Consistent to this, the substitute products are becoming more strong than ever. Several companies have been seduced by strong campaigns in favour of alternative closures in detriment of cork product, which is leading to a very high competitive pressure.
The cork industry is highly dependent on the wine sector, making this sector the main consumer of the cork products. The customers are very exigent, there are always a constant pressure for the improvement of cork’s quality and constant search for low prices.
WORLD CORK IMPORTS 2014
Country Million (€) Country Share (%)
France 221.2 16.2% EUA 211 15.4% Italy 137 10% Portugal 127.6 9.3% Spain 102 7.5% Germany 93.1 6.8% Russia 38.8 2.8% United Kingdom 32.7 2.4% Argentina 31.2 2.3% China 31 2.3% Others 340.9 24.9% Total 1,366.5 100%
26 The cork, as raw product, taken directly from the tree does not have a very high value, what increases the cork’s value is the treatment process of the cork and the production of products that are made through it. Because of this, companies are starting to opt for an upstream integration. However, not all companies have the possibility to opt for an upstream integration since it can be costly and they often do not have financial capacity for that purpose. In this case, the companies that are not able to do an upstream integration will continue to buy the cork as a raw product instead of being their own suppliers.
As previously observed, cork companies must have to produce high quality products and to do things different from its competitors. It is not usual to see lot of companies entering in this sector, and this can be explained by the fact that to be competitive and to be known as a good and successful company it is necessary to have quality standards and long term recognition. In fact, companies such as Corticeira Amorim are well-known companies, with very good reputation and with an history of more than 100 years of existence.
So, to conclude, cork firms need to compete on quality and product differentiation. In order to achieve quality, firms should establish relationships with suppliers and establish processes to create high quality materials so as to meet the market needs. Furthermore, despite the fact that buyers do not have the traditional switching costs, they are loyal to some vendors, taking into account the history of the vendor’s company and the quality set in the process. Therefore, it would take a long time for firms to gain recognition and a long time to build a strong customer base, thus making the cork industry not very attractive for new entrants, except for substitute’s products companies which are the main threat of the major cork’s producers in this sector.
6.2.2. The Portuguese cork industry
The Portuguese cork industry has always walked a step behind the Spanish cork industry, not only in production, as well in marketing and sales of this natural resource. The great turning point in the cork sector, as previously mentioned, stared to occur between the period of the Spanish Civil War (1936s – 1939s). This event led Portugal to claim the world power in the business (Zapata, 2002).
Nowadays, Portugal has the biggest cork oak forest area in the world and, according to Instituto de Conservação da Natureza e da Floresta (ICNF), it represents only 23% of the Portuguese forest (annex 1). Even though, within the forest-based industries (wood, paper and cork) it should be noted that the cork sector, in 2014, represented 16% of the turnover of these
27 industries, 11% of the number of companies and employed 13% of the forest-based industry’s workers.
In Portugal, Alentejo is the best region to found cork oak, with being the cork oak forest 84% of the total forest (chart 1). Although the Alentejo has the major concentration of cork oak, the majority of this production goes then for the transformation process, becoming industrialized in other regions.
Chart 1 - Area of Cork Oak Forest in Portugal by Region (%)
According to data collected from studies conducted in 2014, the Department of strategy and Studies from the Ministry of the Economy identified approximately 650 companies operating in the Portuguese cork industry, producing roughly 40 million cork stoppers per day and employing around 9 thousand of workers (APCOR Cork Information Bureau, 2015). The higher concentration is most significant in Aveiro (Santa Maria da Feira Municipality) and Setubal districts. These two districts are both being responsible for approximately 75% and 12% of the cork industries employment respectively.
The cork sector is composed by mainly micro-enterprises, with 81% of the total sector, by 18.3% of small and medium enterprises and only 0.6% of large companies. However, when evaluating the turnover, it is possible to see that it comes, mostly, from small and medium companies (45.1%) and from large companies (41.5%), where more than 63% of the turnover was generated by companies with more than 20 years of market experience. The cork companies are divided for different economic activities. There are companies dedicated to the
84% 6%
5% 3% 2%
Alentejo Centre Algarve Lisbon and Tejo Vallery North
28 preparation, others to manufacturing of cork stoppers and other cork products or semi-products (table 5).
Table 5 - Portuguese Cork Industry Company's Activities
The main cork activities (table 5) are the manufacturing (388 companies), preparation of cork stoppers (131 companies), essentially for the wine market, the activity of selling cork (78 companies) and the agglomeration and granulation of cork (49 companies). It is estimated that 40% of the cork production is used for the cork stopper’s manufacturing (annex 2).
Nowadays, there are many different industrial applications for cork, although the biggest part of the total production, as previously mentioned, goes to the manufacturing of cork stoppers for the wine industry, which absorbs 71.7% off all cork exports, followed by the building industry with 25.4% (chart 2).
Chart 2 - Structure of Cork Sales (Exports) per Product Type
Activity Nº of Companies
Manufacture of cork stoppers 388
Cork preparation 131
Wholesale of cork in rough 78 Manufacture of other cork products 49
Total 646
Source: Adapted from APCOR - Cork Information Bureau 2015
44%
28%
25% 1%
2%
Natural Cork Stoppers Other Types Cork Stoppers Building Materials Raw Materials Other Cork Products
